Mortgage arrears numbers creep up amid early impact of Covid-19

Both homeowner and buy-to-let mortgage arrears were seen to have increased in the first quarter of 2020, compared with the fourth quarter of 2019.

The number of mortgages in arrears crept up during the first three months of 2020 amid early signs of the impact Covid-19 is having on personal finances.

Some 72,380 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance in the first quarter of 2020, up from 70,880 in the fourth quarter of 2019, figures from UK Finance show.

In the buy-to-let sector, there were 4,420 mortgages in arrears, up slightly from 4,390 the previous quarter.

Mortgage arrears levels for both homeowners and landlords were lower when compared with the first quarter of 2019.

UK Finance’s report said: “The relatively small increase in arrears compared to quarter four 2019 is likely due to the early effects of Covid-19, and the industry has since introduced multiple forbearance measures to reduce financial difficulties for borrowers who are in need of support.”

It said arrears levels remain low by long-term comparisons.

Jackie Bennett, UK Finance senior adviser, mortgages, said: “The banking and finance industry is working hard to support people during this difficult time, including providing more than 1.6 million mortgage payment holidays and introducing a three-month moratorium on any possessions.”

UK Finance’s figures also show 1,070 homeowner-mortgaged properties were repossessed in the first quarter of 2020, 23% fewer than in the same quarter of the previous year.

In the buy-to-let sector, 640 mortgaged properties were repossessed in the first quarter of 2020, 8% more than in the same quarter of the previous year.

Callum Bilbe, a data and research analyst at UK Finance said: “The figures today highlight the importance of the work that the industry has done so far. While we did see a modest increase in arrears from quarter four 2019 to quarter one 2020 (the vast majority of which were new arrears in March), this rise relates to the very earliest effects of the Covid-19 outbreak at the start of March, with the payment holiday scheme being introduced shortly after this, helping to prevent further payment issues for borrowers who might be struggling.

“There was a small decrease in the number of residential possessions and an increase in buy-to-let possessions compared to this time last year, which is due to the backlog of historic cases and ensuring that these are being processed on the same basis as the latest regulatory requirements. Lenders continue to show flexibility to borrowers in financial difficulty and possession is always a last resort.”

He said anyone who is struggling with mortgage payments should visit their lender’s website for more information about the help on offer.